Citibank makes deep job cuts

53,000 jobs will go

Posted: Tuesday, November 18, 2008

By Madlen Read

NEW YORK - Citigroup, widely seen as the sickest Wall Street bank, will make some of the most severe cuts in the history of U.S. business - 53,000 jobs - as it tries to slash costs and get back to basics before it's too late.

The cuts, which will leave Citi about 20 percent smaller, are the latest step in a stunning remaking of the American banking landscape since the financial meltdown, an upheaval that has included the demise of storied investment houses and the conversion of others into commercial banks.

Citigroup CEO Vikram Pandit met with employees Monday and laid out the bank's strategy in stark terms: "We are a bank. What does a bank do? A bank takes deposits and puts them to work by investing and making loans."

Challenger, Gray & Christmas Inc., which has tracked downsizing since 1993, said Citi's cuts are the second-most on record. IBM announced in July it was cutting 60,000.

At its peak in 2007, Citi had 375,000 employees.

About half the cuts are expected to come from selling off parts of the business. The bank already has said it would sell Citi Global Services and its German retail banking businesses, and it plans to unload more, a spokesman said. The remainder of the cuts are expected to come from layoffs and attrition.

As investors digested that news, financial stocks had a bad day. Citigroup stock fell 63 cents, or more than 6 percent, to $8.89. The Dow Jones industrials, nearing their lowest close since the financial meltdown began in September, lost nearly 224 points to close at 8,273.58.

The government invested $25 billion in Citigroup as part of the financial rescue package. On Monday, the Treasury Department announced it had given $33.6 billion to 21 banks in a second round of payments from the program.

Still, the Bush administration has told lawmakers it does not plan to use at least half of the $700 billion bailout fund, congressional officials said. That would leave President-elect Barack Obama to decide how to use the money when he takes office in January. The Treasury Department said no decision had been made on whether to spend the remainder of the money before Bush leaves office.

For Citi, the simple, leaner plan is a noticeable change from earlier in the decade, when banks were making a huge chunk of their profits from complex structured-finance products based on risky debt, such as subprime mortgages.

Now those revenues have all but dried up, and Citi is trying to extract itself from exotic debt instruments.

"The shocking thing is that the Wall Street business model, prior to September, is effectively gone. We don't have any more independent investment banks," said Lee Pinkowitz, a n associate finance professor at Georgetown University Business School.

Citigroup has long been criticized as too sprawling and difficult to manage. "Why the heck do they need 350,000 people to start with?" said Robert Howell, a finance professor at Dartmouth's Tuck School of Business.